Chapter: Business Science - Business Ethics, Corporate Social Responsibility and Governance

What are the Causes of Unethical Behavior in the Workplace?

What is an Unethical Behavior?
The Civil Service Commission of Philippines defined an unethical behavior as any behavior prohibited by law. In a dynamic business environment, a ―large gray area‖ exists that makes it difficult and unclear to distinguish what is ethical.

What
Are the Causes of Unethical Behavior in the Workplace?

What is an Unethical Behavior?

The Civil Service Commission of
Philippines defined an unethical behavior as any behavior prohibited by law. In
a dynamic business environment, a ―large gray area‖ exists that makes it
difficult and unclear to distinguish what is ethical. An unethical behavior
would therefore be defined as one that is not morally honorable or one that is
prohibited by the law. Many behaviors will fall in the classification including
corruption, mail and wire fraud, discrimination and harassment, insider
trading, conflicts of interest, improper use of company assets, bribery and
kickbacks, compliance procedures, ethical relations with others, disciplinary
action, fraud, illegal business donations, patent infringement and product
liability (Barrcus & Near, 1991, 12). Unethical behaviors that stimulated
interest in ethics include Watergate events, Lockheed Scandal, the 1972 United
States presidential election, illegal business donations and bribery of foreign
officials in order to induce business abroad (Carroll, 1978, 5). Today, the
most common ones are false communication, collusion, conflicts of interest,
gifts and kickbacks, health services providers‘ unfair practices, insider
trading, discrimination and harassment, and embezzlement.

False Communications

False communications fall into
various categories. They include falsification of auditor‘s or controller‘s
report or any form of manipulation that does not tell the whole truth. These
include cheating on tax returns or inappropriate depreciation schedule and
wrong expenses (Brennan Jr., Valtz, Shallenberger & Stanton, 1961, 164).
Feeding the public with wrong report of the organization‘s business performance
to make the organization look good is another common practice. In 2001, Enron
gave wrong information about their loss because Ken Lay, the CEO of Enron, was
advised by some trusted Enron executives to report only $1.2 billion of the $7
billion in losses because it was felt that the amount could be explained
reasonably without doing more damage to the falling stock price of the company
(Collins, 2007, 3). Similar to this was the case of Manville Corporation. The
top management of the Corporation suppressed, for decades, evidence which
proved that asbestos inhalation was killing their employees.

Collusion

Collusion, especially with
competitors, to fix prices, is an unfair business practice today. This could be
considered stealing from customers. However, there are differences of opinion
on whether or not price fixing is stealing from customers (Brennan Jr., Valtz,
Shallenberger & Stanton, 1961, 174).

Gifts and Kickbacks

Some organizations do not allow
their employees to receive gifts from clients during normal course of business.
Those who do, generally provide guide lines on limitations as to the amount an
employee can receive as gift. Sometimes a buyer may request for kickbacks or
entertainment which, if not provided, may lead to the loss of the customer. An
employee frequently receives pressure from the management to behave unethically
or to obtain profitable business at any cost, which may include the use of any
possible dirty tricks. The employees who desire to be retained or promoted have
no choice but to dance to the tune of the management. This is because there
were cases of those who refused to behave unethically the way management
instructed and were fired or nearly fired (Brennan Jr., Valtz, Shallenberger
& Stanton, 1961, 165).

Conflict of Interest

Conflict of interest occurs when
ones private interest interferes or appears to interfere in any way with the
interest of the organization. According to Sliglitz, it can be argued that
there is no conflict of interest because, based on Adam Smith‘s view, the
individuals, when pursuing their own self- interest are actually pursuing the
general interest of society (Sliglitz, 2003, 2). Some examples of conflicts of
interest are:

-diverting from the organization for
personal benefit, a business opportunity,

-using the organization‘s assets for
personal benefit,

-accepting any valuable thing from
the organization‘s customers or suppliers, and

-having a financial interest in an
organization‘s competitor.

Unethical practices in the Health Care Sector

There are three common unethical
practices in the Health Care Sector. The first is refusing to provide health care
services to the patients who have no medical insurance. Some Health Centers do
not admit patients who have no insurance unless they can provide evidence that
they have the ability to pay for the health service. The second unethical
practice in the health care sector is over treating patients to boost income.
The third is doing surgery at surgical centers instead of the hospital so that
the doctors do not have to ―pull call at any hospital‖

Insider Trading

Insider trading is an unethical
behavior which occurs when a person who has access to confidential information
uses or shares the information for securities trading purposes or any other
purpose except the conduct of regular company business. The confidential
information of the company are not to be used for achieving personal gain
neither are they to be disseminated directly or indirectly, to friends, family
members and other outsiders who may in turn trade on or misuse the information.

Discrimination and Harassment

Discrimination involves not providing
equal opportunity in employment on merit but on other basis such as race, sex,
national origin, age, religion, or any other basis not related to the job.
Harassment is a derogatory comment or unwelcome sexual advances (FS Networks,
Inc., 2004,

Wrong Doing

A large number of people, including
top management, are involved in wrong doing both in the public and in the
private sectors. The managers of E.E. Hutton, for example, were found guilty of
2000 mail and wire fraud. Similarly, the supervisors of a defense contractor
were accused of falsifying time cards (Gellerman, 1986, 85).

Why People Behave Unethically

Dedicated employees, who are usually
honest, sometimes behave unethically because of four rationalizations: that no
one will ever find out, that the behavior is not really illegal, that it is in
the best interest of the organization, and that the organization will protect
them. Although the costs of unethical behavior are hard to measure, they can
add, according to research, more than 20% to the cost of doing business. The
costs will include low wages, unemployment, and poverty. If top management
wants to improve organizational performance, they must stand firm that ethical
methods are the only ways business should be done.

Causes of Unethical Behaviors

The
study that was commissioned by American Management Association (AMA) and which
was conducted by the Human Resource Institute (HRI) using 1121 managers and
Human Resource experts as participants, revealed that the leading cause of
unethical corporate behavior is ―pressure to meet unrealistic business
objectives and deadlines.‖ The study also showed that the second leading factor
that causes unethical behavior is the desire to further one‘s career while the
third leading factor is the desire to protect one‘s livelihood (Schwartz, 2006,
1) and (MacDo, 2006, 1).

Job pressure, according to the
study, causes employees to engage in unethical behaviors that include cutting
corners on quality control, covering up incidents and lying to customers. Ignorance
is another major cause of unethical behaviors. The study of (AMA) and (HRI),
(MacDo, 2006, 1), revealed that the ignorance that the acts are unethical and
not knowing the seriousness of the consequences when caught, are causes of
unethical behaviors.

Competition for scarce resources,
power or position can cause individuals to engage in unethical behaviors.
Hosmer emphasized that an attempt to improve their corporate competitive
positions made managers to take immoral actions (Hosmer, 1987, 439). Bazerman
and Banaji felt that the cause of the unethical behaviors in organizations is
the presence of a ―few bad apples‖ among organizational actors ( Bazerman &
Banaji , 2004, 111). The primary cause of unethical behaviors can be traced to
lack of maintaining the type of consistent leadership that is necessary for
running an ethical organization. This exposes the employees to opportunities
that make them engage in unethical behaviors.

Recommendations

The National Defense University
proposed three ethical responses to unethical behaviors in their ―Strategic
Leadership and Decision Making:‖ exit, voice and loyalty. With respect to
―exit‖ it is recommended that if one cannot live with the behavior, or the
behavior does not meet one‘s ethical standards, one should leave. The second
response, ―voice,‖ is to express discomfort with and opposition to the
unethical behavior. The third response, ―loyalty,‖ supports the idea of
remaining in the organization and trying to change it instead of leaving
(National Defense University, 1986, 8).

In order to restore and maintain a
culture that upholds honest and ethical behaviors, the organizational leaders
must verbally promote ethical environment and relentlessly ―walk the talk,‖ by
making ethical behavior part of the organization‘s agenda. They need to
establis h codes of business conduct to guide employees‘ behaviors. There
should be the establishment of annual business ethics training for the
employees and a good whistle blowing mechanism. Since job pressure was identified
as major cause of unethical behavior, in order to reduce the pressure,
communications and commitment by top management are recommended (McShulskis,
1997, 24).

Conclusion

Today, there is a tremendous loss of
confidence in corporate conduct and there is an urgent need to work towards
restoring it. Although ethics education seem to produce limited evidence of
changing behaviors, the commitment of management to monitor annual ethics
education for all employees will produce the desired favorable results. There
should be clear communication to the employees of what are honorable and
expected behaviors in the organization. They must maintain and stand firm on a
clear cut policy that ethical methods are the only way of doing business.

People act unethically for a number
of reasons. Unethical behavior is defined as behavior that contravenes rules
designed to maintain the fairness and morality of a situation. An example of
unethical behavior is a representative of a company taking kickbacks from a
salesman for preferential treatment. Behavior like this is motivated by various
things.

Kinds
of Unethical Behavior in Business

Theft

Theft at work comes in a variety of
forms, and oftentimes employees do not view it as une thical behavior,
believing no one gets hurt by the action. Employees take home office supplies,
use business computers for personal tasks, pad expense accounts and abuse sick
time or allotted personal days. Unethical behavior also includes having another
e mployee punch a time card, or not punching out for lunch hours or other
nonapproved time off. Though these may seem like minor infractions, they
eventually have an impact on the bottom line of the company, which then hurts
all employees. Theft also affects employee morale and is disheartening to those
who choose to behave ethically.

Vendor
Relations hips

Businesses that buy from and sell
products to other businesses are sometimes subject to unethical behavior. The
practice of accepting gifts from a vendor in exchange for increased purchasing
is not only unethical, it may have legal repercussions. The same can be said
for offering customer kickbacks to increase his purchasing habits. Ethics
policies often contain guidelines for giving or accepting gifts with vendors or
other business associates, such as a cap on the value of the gift. Other
businesses strictly forbid giving gifts or any other item with monetary value.
This is a safeguard to prevent any perception of unethical behavior.

Bending
the Rules

Bending the rules in a business
situation is often the result of a psychological stimulus. If an employee is
asked to perform an unethical task by a supervisor or manager, he may do it
because his allegiance to authority is greater than his need to abide by the
rules. Turning the other way to avoid trouble for another employee is still
unethical, even though the motivation may be empathetic. For example, knowing
that a coworker is having issues outside work justifies watching him leave
early each day without reporting it. Withholding information that can change an
outcome also falls under the umbrella of unethical behavior, even if the
perpetrator believes he is doing what is in the best interest of the business.
For example, if a poor earnings report is withheld until after a stockholder
meeting.

Environmental
issues

Unethical behavior by companies,
such as releasing pollutants into the air, can affect cities, towns, waterways
and masses of people. Though accidents can occur, the release of harmful toxins
into the environment due to lax safety standards, improper maintenance of
equipment or other preventable reasons is unethical. If a business willingly
continues production of a product knowing inherent environmental risks exist,
it can certainly be categorized as unethical behavior.

Wages
and Working Conditions

Other unethical practices include
not paying workers a fair wage, employing children under the legal working age
and unsafe or unsanitary working conditions. Any practices that are not in
compliance with fair labor standards and federal working guidelines fall into
this category.